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Effective Governance and Strong Financial Performance

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Effective Governance and Strong Financial Performance ARM Holdings plc 110 Fulbourn Road Cambridge CB1 9NJ United Kingdom Telephone +44 (0)1223 400400 Facsimile +44 (0)1223 400410 www.arm.com twitter: @ARMCommunity pinterest: ARMLtd facebook.com/ARMfans youtube.com/armflix EFFECTIVE GOVERNANCE AND STRONG FINANCIAL PERFOrmaNCE ARM Holdings plc Annual Report 2013: Governance & Financial Report ARM HOLDINGS PLC Governance and Financial Report 2013 ARM’s annual report is in two parts. The Strategic Report contains The Governance and Financial Report contains the details about information about the Group, how we make money and how we run how we run the business and remunerate management, and how the business. It includes our strategy, business model, markets and we organise ourselves financially. key performance indicators, as well as our approach to governance, sustainability and risk management, and a summary of our Online you can find more information about our end markets, financial management. including case studies about how our technology is used in our customers’ products. A more detailed Corporate Responsibility report is also available online. GOVERNANCE AND FINANCIAL REPORT STraTEGIC REPORT ONLINE REPORTING Governance Our Vision Front cover Most major population centres are now Chairman’s introduction 1 Operational highlights covered by 3G or 4G networks, and there Board of directors 4 Financial highlights were more than two billion smartphones and tablets connecting to the internet in Corporate governance 6 Chairman’s review 2013. With some mobile computers now costing as little as $35, many more people Directors’ report 23 Chief Executive’s statement can now afford to buy a smart device. Directors’ remuneration report 29 Our Performance An entry-level mobile computer may have up to four ARM®-based chips. Financial Report Our marketplace Downloads Independent auditors’ report to the Our business model More information about ARM and our members of ARM Holdings plc 55 end market opportunities are available Our global reach on our website. Consolidated income statement 60 Strategy and key Reports available online: Consolidated statement performance indicators of comprehensive income 60 Mobile computing Strategic Report Consolidated balance sheet 61 Enterprise infrastructure Governance and Financial Report Consolidated cash flow statement 62 Embedded computing Corporate Responsibility report Consolidated statement of changes in shareholders’ equity 63 Our Commitment www.arm.com/reporting2013 Notes to the financial statements 64 Governance Company balance sheet/UK GAAP 109 Sustainability Notes to the financial statements/ Risk management and principal risks UK GAAP 110 Our Financial Report Independent auditors’ report to the members of ARM Holdings plc 115 Financial Report Glossary and Group directory Glossary 117 Group directory 118 Key shareholder information 120 Governance Financial Report CHAIRMAN’S INTRODUCTION A STRONG AND EFFECTIVE GOVERNANCE SYSTEM SIR JOHN BUCHANAN Chairman This report explains the Board’s commitment to good The Board actively considers long-term strategy, monitors, challenges and supports corporate governance, corporate responsibility and the the work of the Executive Committee, and highest ethical standards. We believe that effective governance is responsible for Board and executive is an essential contributor to our sustained improvement in management succession. My role as Chairman is to provide the leadership to business performance. ensure high quality decision making in all areas of strategy, performance, responsibility “Operating with integrity in all we do is vital to maintain the trust and accountability. of investors, customers, our employees and other stakeholders. As a Board, we have ultimate responsibility This requires leadership, ethical behaviour and collaboration.” for the Group’s performance and for overseeing the management of risk. We seek to do this through a strong and effective Dear shareholder The Board’s aim is to nurture a working governance system and by setting and Welcome to ARM’s 2013 Governance and environment in which the highest standards following the standards that we expect from Financial Report. This is the first year we have of behaviour are established, demonstrated all our employees. These standards are created the annual report as two documents: and maintained in all our activities. This helps enshrined in ARM’s seven shared values, a Strategic Report containing an update on us to run the Group effectively and exercise which are listed below. judgement to manage the risks that we face ARM’s progress during the year, a summary of This part of the report explains how we to levels that are commensurate with the our approach to governance, and our financial comply with good corporate governance nature of our business. There are results; and a separate document giving more principles, describes how the Board detail on governance at ARM and our full well-defined differences in roles between the and its Committees work to provide accounts. We believe that these two executive and non-executive directors and appropriate oversight, and our approach documents together fulfil the best practice their combined contributions as an to risk management and internal control. guidelines given by the UK Government’s experienced, but healthily diverse, team add Risk management and principal risks are also Department for Business Innovation and value to the debate, decision making and covered on pages 47 to 49 of the Strategic Skills. As ever we welcome your feedback, development of strategy that are so crucial Report. During 2013, management reviewed and you can contact us via the investor to the Group’s success. and improved our risk assessment and relations website at www.arm.com/ir. reporting framework under the guidance of Kathleen O’Donovan, who chairs the Audit Committee, and with assistance from external advisers. We need to ensure that 1 ARM HOLDINGS PLC Governance and Financial Report 2013 CHAIRMAN’S INTRODUCTION continued our processes are fit for purpose, and that the Chairman of Rexam plc and a non-executive Reports from the various Board Committees information that comes to the Board focuses director of Tesco PLC. Up to 2009, he was and details of their current composition are on the principal risks and appropriately informs the Group Chief Executive of Nippon Sheet covered in more detail in the Corporate our ongoing risk appetite discussions. Glass Group which acquired Pilkington plc in Governance and Remuneration reports below. 2006, where he was Chief Executive. Prior to Directors and succession planning the glass industry, Stuart held a number During 2013, the Board played an important As part of our planned and continuing of senior positions at Mars, Inc., having role in successfully guiding ARM through evolution of the Board there were a number previously spent ten years in several European the Chief Executive Officer transition and of changes in 2013, and further changes are roles at Royal Dutch Shell plc. ensuring that the Group’s performance planned in 2014. targets were achieved in the challenging It has been a great privilege to serve as and competitive economic environment. Simon Segars succeeded Warren East as Chairman of ARM and I have greatly enjoyed The Board also provided clear strategic Chief Executive Officer on 1 July 2013 and my time on the Board of this fine company. direction and ensured that the Group’s the strong financial performance achieved for Due to the medical uncertainties, it is right standards of conduct met its expectations. the full year demonstrates that the transition that I should step aside at this time and I wish has been seamless and well executed. the Group well under its new leadership. I will The roles and specific expertise of the current The Board was delighted to have a candidate continue as an independent non-executive members of the Board are set out in the of Simon’s experience and calibre within ARM director until the AGM on 1 May 2014 and Biographies section on pages 4 to 5. to appoint to this role. Following an extensive will then retire from the Board. Diversity externally conducted review of candidates worldwide, Simon’s proven technology Philip Rowley will also be retiring from the After the changes referred to above, the expertise and management skills across a Board at the AGM, on the ninth anniversary Board will comprise three executive directors, range of senior executive roles resulted in of his election by shareholders. On behalf the Chairman, and five non-executive him being selected. His initiatives in the period of the Board I want to express our deep directors. At the year end there were eight since his appointment, including changes to appreciation to Philip for his excellent, wide men (80%) and two women (20%) which the organisation structure to better address ranging contributions during his tenure. broadly reflects the gender diversity of ARM’s the needs of our customers, confirm that he He chaired the Remuneration Committee workforce as a whole. is highly qualified to take the Group forward. until 31 December 2013, before that was Chairman of the Audit Committee, and he Diversity of the Board Warren retired after nearly 12 years as CEO has also been a long-standing member of the and 19 outstanding years with the Group. Nomination Committee. We offer our deep Men 80% Women 20% He built a strong platform for growth and thanks and wish him well for the future. consistently created value for shareholders, even in a challenging external environment. The Board reflects a balance between On behalf of the Board and the wider ARM technology sector, commercial, financial team, deep thanks are due to Warren for his and general business skills, with a highly passion, service and leadership. The Board experienced international team leading the was delighted to see Warren’s achievements business in both executive and non-executive acknowledged through the award of a CBE in roles. We were pleased to welcome Eric Meurice to the Board in July 2013. He brings the 2014 New Year’s Honours List.
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